Archive for November, 2008

The Greening of the Supply Chain: Mind your Three P’s.

Friday, November 28th, 2008

What does it mean to go Green? I was reading the Aberdeen white paper Building a Green Supply Chain from March of this year and believe they may in a concise format have the best glossary of definitions as to the meaning of and impact on what it means to be Green. Their short but effective green glossary defines the following terms.

1. Corporate Social Responsibility (CSR) posits that companies have a responsibility to be social and environmental stewards and that having a positive impact on society and the planet is as important as profit.
2. Green refers to practices, processes and products that have a minimal impact on the health of the ecosystem. The emphasis is on non hazardous recyclable, reusable, and energy efficient products and processes.
3. Sustainability ensures the ability to meet present needs and profits, today, without compromising the ability to meet them tomorrow.
4. Triple Bottom Line (TBL) determines that business has positive impacts on the three P’s: people, profit and planet and is a standard framework for CSR agendas.

It might be interesting to ask CEO’s around the country if they agree with these definitions. Many probably do. The answer would however be a good indicator of a company’s commitment to being Green and not just caught up in green wash.

Yesterday Wal-Mart and Costco announced better than expected results for their past quarter and the stock market was delighted. What if their results had not been as good and same store sales were flat? But concurrently the companies offered guidance of the significant and positive impact they are having on the evolution of a green supply chain. Would Wall Street have reacted in the same way? Personally I think it highly unlikely.

The great news is that every day more and more emphasis is being placed on this subject by companies of all sizes.

We value and look forward to your comments.

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HAPPY THANKSGIVING

Thursday, November 27th, 2008

To all of the retailers that provide the products we buy. To all of the suppliers that provide retailers with these products. To all their familes and friends and to ours, SafeSourcing wishes you all a safe and happy Thanksgiving

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The FDA opens offices in China

Thursday, November 27th, 2008

More on this next week.

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An important repost regarding the importance of supplier slection because consumers care about the environment and safety.

Tuesday, November 25th, 2008

If you wish to host a successful reverse auction a robust supplier database is key to encouraging competitive bidding. A logical focal point for hosting a competitive auction is to assemble all of your present vendors for a particular category that you hold in good standing. These are suppliers from whom you have sourced products using traditional means in the past. In general the principal is the more vendors or suppliers that participate, the better your potential results. This however also requires strategic thought because you are beginning a process that you want to use on a recurring basis. As such inviting the same suppliers again and again may seem to make sense, but may not encourage the results you are looking for. This is a critical reason why it is important to have the most robust supplier data possible available for your review. If you can only find six local suppliers for a particular auction, they will all most likely agree to participate the first time. However a key issue to consider is what will encourage them to participate the next time and after that? Suppliers will almost always not be the same size. As such the smaller vendors will most likely bid early and drop out after the early rounds. These suppliers will most likely not agree to compete in the future as they consider their chance of winning the business unrealistic. Suppliers that finish first or second or incumbents that are displaced will agree to participate again, but lack of competition will make the auctions less successful.

A logical question would then be. If we only have six suppliers available how many should we invite to participate? Should we invite them all? Every company will answer this question differently. When considering the future, do we want events or do we want continual process improvement that drives continuous savings. There are several possible solutions to consider. First, only invite four participants to begin with. This will create a competitive environment for your auction. Let’s assume that in twelve months when you repeat this auction that the two largest suppliers agree to return. You could now invite supplier’s number five and six that were not included in the original auction. You have now created a competitive auction for the second year or cycle. A second thought might be to not invite all of the largest suppliers to your first auction, in order to manage the quality of your suppliers for future auctions. This type of critical thinking supports continual process improvement in e-procurement implementations.

We appreaciate and look forward to your comments.

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Consumers care about the environment and safety; not so much about your profitability.

Monday, November 24th, 2008

Customer satisfaction may be as important as company net profitability. That is if you want to continue to grow the later and maintain your customer base.

If your customers are satisfied they will continue to shop in your stores. As a result, you can continue to grow wallet share for that customer base. Depending on each deciles percentage of sales and margin contribution it is safe to assume that loss of a single customer in your top deciles to competition or dissatisfaction can have a huge impact on the bottom line of retailers in an industry that lives in a one percent net profit world. Customers today care about environmental sustainability and if the perception is that your company does not consider this in their sourcing practices, that customer may well decide to shop somewhere else.

So, what does all this have to do with e-procurement? Actually, quite a bit. I was reading one of my favorite blogs on sourcing at Sourcing Innovation titled A Field Guide to Green Sourcing II. The author (the doctor) reviews Deloitte’s Six Step Strategic Green Sourcing Process. Although the entire process deserves review and a nice job is done by the doctor to that end. Of particular interest to this author is step number three listed below?

#3 Supply Market Assessment: In addition to the identification of potential sources of supply, an intense effort is made to identify and assess vendors who specialize in sustainable products and services. Don’t overlook the smaller, nimble, vendors, as they are often innovation leaders on the forefront who can offer insights into the latest technologies, methods, and processes above and beyond what your large, legacy, manufacturers may be able to provide

This author has been an advocate of exactly this point , and has discussed the same in a number of blog posts over the last six months. Here’s an early one from May. The issue is that although this may be a goal of your company; how will your company monitor these potential new sources of supply for compliance? I would advocate that there is a need for a supplier database that contains as many possible new sources of supply as possible and that those suppliers be held accountable to sustainable standards as a by product of inclusion in the database. The largest and to this authors knowledge only database available to retailers today that accomplishes this objective in it’s entirety is the SafeSourceIt™ North American supplier database comprised of over 250,000 North American retail suppliers.

We appreciate and look forward to your comments.

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If yesterdays post got your attention and cost savings is your important initiative. Read On.

Friday, November 21st, 2008

Quality e-procurement quickly in a time of heightened Corporate Social Responsibility (CSR)

Most companies understand that lowering their cost of goods provides the greatest benefit to their bottom line, but they face significant challenges in trying to do so. So, why do some companies succeed while others continue to implement program after program with no measurable benefit. First among these is the recognition that effective e-procurement initiatives like any successful program requires strong support from executive management. This is important because Retail as an industry lags well behind other industries in utilization rates of e-procurement tools. So at a minimum in order to get off on the right foot, this typically means the CEO, CFO, CLO or CPO sponsorship is critical. Once this directive has been issued, the next step is to identify savings targets across all corporate spend categories. Once these targets are identified and ranked, a category specific attack plan can be developed that best maximizes savings opportunities. It is important to note, that savings alone do not create a successful e-procurement plan. What can not be sacrificed in the name of cost reduction is quality, which can include safety as well as Corporate Social Responsibility (CSR) goals including environmental support programs.

However, a key challenge for any procurement organization directed to implement e-procurement tools across all of their unique spend categories, is to not over complicate the process into something that you can’t maintain. At a high level, the following steps will insure that you are headed down the right path.

Identify all opportunities
Develop a total company strategy
Source qualified suppliers
Negotiate final terms
Award of business
Contract completion
Results Analysis

Most quality e-procurement organizations have well developed plans that will aid you in implementing your best practices while maintaining quality and supporting your CSR initiatives.

I look forward to your comments.

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COST SAVINGS, COST SAVINGS, COST SAVINGS!

Thursday, November 20th, 2008

This author would like to know why this is not the most important initiative of all retail companies. Why do we fight it so?

I can meet with a retailer and roll out charts that reflect savings from recent reverse auctions of retailers in a similar format and geography that are as recent as twenty four hours ago. As real as those results are, it is still difficult for the retailer to pull the trigger to give a new process a try. This is even true for full service events offered in the form of Software as a Service. We just seem to get in our own way sometimes because we have important things to do. I sometimes wonder if there was ever a retailer or a prospective retailer that was directed by their CEO to bring in all companies that have a new way of doing things, and none of the companies that have been doing the same old thing for years, what the result of those meetings might be if implemented.

Sometimes we just make things to difficult. In this case let’s assume that the CEO directs that he or she would like the cost of goods reduced asap. The project is then assigned to the Senior Vice President of Supply Chain or Chief Logistics Officer or Chief Procurement Officer or other senior executive. This is further assigned to the Vice President of Purchasing who in turn assigns it to the director of supply purchases. The director convenes a meeting of the buyers or category managers responsible for a variety of supply categories. Now the excuses begin.

1. We can’t damage our relationship with our suppliers.
2. We get the best price in the industry right now.
3. These guys don’t know what they are talking about.
4. Don’t we have a tool that does this in our ERP system?
5. We’ll sacrifice quality.

I could go on an on with more excuses or objections, but I think most of you get my drift. Everyone has one. Have you ever heard the quote that “A camel is a horse created by committee”? Well, here we are in the stable and nothing has been done yet. But the dung is getting pretty strong.

If we go back to the CEO and explain what the situation is, one is likely to get a reply that says as the Nike commercial does; JUST DO IT! Unfortunately that needs to be followed by; DO IT KNOW!

From start to finish, a reverse auction should take no more than two weeks to run. This includes the entire process including and RFI if necessary from the day a retailer says go to the award of business. With that said, there are several requirements necessary to accomplish this. These eliminate the worry and mitigate the risk.

1. A robust supplier database with safety and environmental focus.
2. A robust event template library.
3. An intuitive or intelligent tool for building an event quickly.
4. An automated reporting tool to provide immediate event detail.

Stop the excuses. If you are really interested in improving your bottom line now while we are in the midst of an economic meltdown, you are less than two weeks away from immediate results. But you can not be a camel herder.

We appreciate and look forward to your comments.

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A timely repost. Twenty steps to running high quality e-procurement events.

Wednesday, November 19th, 2008

This author had a rather lengthy conversation with a CPO “Chief Procurement Officer ” today who asked my advice regarding what I thought was important in running high quality e-procurement events. I pointed him to one of my previous posts and thought it might be useful to repost for other first time visitors.

E-Procurement events have been around since the late 1990’s and are commonly referred to as reverse auctions or events. These sessions can from time to time also run as forward auctions in order to reduce over stock conditions and reduce shrink. Regardless of the naming convention used there are certain rules which if followed will create higher quality events for the retailer and the supplier? This will result in creating better savings opportunities or cost avoidance in a tough market. The importance of focusing on a clear process will increase event participation. This focus on quality will be recognized by your existing trading partners and potential new sources of supply, and will keep them coming back in the future to compete fairly for your business.

1. Executive sponsorship is mandatory
a. This is required at the CEO, CFO, CPO, CLO or head of the supply chain.
2. Get the entire buying organization together for a kickoff session.
3. Provide an over view of what you are going to do and the impact it can have on the company. Use company financial models.
4. Discuss and agree on success criteria.
5. Every event is not a homerun. Singles and doubles score runs.
6. Create a fun environment.
7. Consider prizes for the most creative use of an auction.
8. Use scorecards by department with percent of savings.
9. Discuss the meaning and importance of corporate aggregation.
10. Hand out event templates to gather existing product specifications.
11. Put a time requirement on data collection.
12. Gather an accurate list of your present suppliers.
13. Work with your sourcing company to identify a top 100 list of events.
14. Calendar the events.
15. Prioritize by dollar value, date and strategic value.
16. Conduct department level discovery meetings of 30 minutes to an hour.
17. Investigate existing contract language.
18. Look for auto renewal (evergreen) language roadblocks.
19. Determine alternate sources of supply with your sourcing company.
20. Develop an event rules and instruction template and post with each event.

Although these steps are not all encompassing, they provide a format for getting started that offers the best opportunity for reduction in cost of goods, expenses and improvement in corporate earnings. Be sure to combine this with a business partner that knows your business.

I look forward to you comments.

Ron

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Here’s a twist! A New Retail Sourcing Mantra. Think Globally Source Locally!

Tuesday, November 18th, 2008

Among many reasons to sourcing more of your retail products locally could be that it is good for the environment.

Many of you may be aware of the often used quote “Think Globally, Act Locally” which was reportedly coined by David Brower, founder of FOE or Friends of the Earth. Others have attributed it to Rene Dubos an advisor to the United Nations Conference of the Human Environment. Regardless of who said it, there are varieties of reasons to reconsider sourcing more of your products locally…

Environmental sustainability is becoming more and more important in the executive suite of major U.S. Corporations. Many have launched specific Corporate Social Responsibility programs as an innovative approach to reducing their carbon footprint and that of their trading partners. Sourcing more products locally can be a major contributor to these programs.

Less than six months ago when oil prices hit their apex, many companies began to consider sourcing more locally due to the increase in transportation costs. Some companies went as far as having their containers recycled and melted down because the cost of shipping them back to the Far East was just too expensive. What many do not realize is that carbon dioxide emissions from shipping are double those of aviation and increasing at an alarming rate which will have a serious impact on global warming according to research by the industry and European academics.
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One international company’s study indicated that their carbon footprint came from four main areas. The second largest area was ocean freight at 23 percent. Additionally researchers at the Institute for Physics and Atmosphere in Wessling, Germany reveal that annual emissions from shipping range between 600 and 800m tonnes of carbon dioxide, or up to 5% of the global total. This is nearly double Britain’s total emissions and more than all African countries combined.

To be sure, most countries have signed and ratified the Kyoto Protocol which establishes legally binding commitments for the reduction of six greenhouse gases such as carbon dioxide, hydro fluorocarbons and others and are working with international companies to insure reductions. However, beyond the benefit of better pricing, the emissions issues associated with ocean freight shipping should provide additional incentive to North American based retailers to look within the NAFTA trade area for product alternatives to those sourced from areas that require ocean bound freight.

We look forward to and appreciate your comments.

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To end last weeks blog series,here are nine steps to safer and more eco-friendly procurement.

Monday, November 17th, 2008

Last week our three part blog series “The sourcing of quality safe retail products at the best market price is the most difficult job in retail” begged the question; what are the next steps and where can we get more education?

Below are nine steps to safer and moe eco-friendly procurement.

1. Be pro-active in driving not for resale and for resale product safety within your company, and also supporting eco-standards in the procurement process.
2. Pay it forward with all of your trading partners by sharing what you are doing, and asking what they do to support yours or similar initiatives.
3. Educate your employees and trading partners about common safety standards and guidelines such as the SQF Certificate www.sqfi.com and the Global Food Safety Initiative www.ciesnet.com.
4. Educate your employees and trading partners about common eco-standards such as Green- Energy National Standard www.green-e.org or EcoLogo www.ecologo.org.
5. Point associates and trading partners to free educational websites such as www.safesourcing.com to use their free SafeSourcing Wiki or the Sourcebook professional social network for procurement professionals.
6. Only use trading partners that follow your lead.
7. Train your team to understand and use all available tools that insure supply chain safety such the free daily safety in sourcing blog at www.safesourcing.com or the low cost SafeSourceIt Supplier Database and Reverse Auction Tools.
8. Impose a system of measures and controls to monitor performance against clearly defined goals.
9. Start at the top and engage all levels of your company.

We appreciate and look forward to your comments.

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